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Climate Change and Accountants

With COP26 around the corner Anzo Francis, chair of the Business Board and London Society of Chartered Accountants Vice President discusses accountant’s role in the climate crisis.

October 2021

Anzo Francis

The United Nations COP26 summit takes place in Glasgow in November 2021, and the UK Government, Co-president of COP26, remains committed to tackling the global climate change emergency, taking a leading role in limiting global warming, and achieving a carbon-neutral world by 2050.

There are a number of ways that accountants can assist organisations to set carbon reduction targets, measure and reduce carbon emissions, divert investment into more sustainable projects, change organisation culture, and manage climate-change risk.

Carbon Accounting

Accountants involved in physical carbon accounting help businesses, organisations and countries quantify physical amounts of greenhouse gas emitted into to the atmosphere, and create a greenhouse gas inventory. Once it has been established how much carbon is being emitted, reduction targets can be set. At an industry or country level, this helps to assign responsibility to different parties for their associated carbon emissions.

Carbon footprints

Accountants can collect and analyse data across an organisation to measure the organisation’s carbon footprint. This will encompass the organisation’s activities, plus its employees and suppliers. The analysis will help to identify the biggest emission drivers, and what to target.

A new standard to help the financial industry measure and report financed greenhouse gas (GHG) emissions was launched at the end of 2020. The Global GHG Accounting and Reporting Standard for the Financial Industry was developed by the Partnership for Carbon Accounting Financials (PCAF) as a response to industry demand for a global, standardized approach to measure and report finance emissions.

Carbon credits

Accountants can assist organisations to invest in environmental projects around the world that help reduce greenhouse gas emissions. Such activity may at the same time improve the livelihoods of local communities, and preserve biodiversity and wildlife. These projects generate carbon credits that can be used to compensate for your company’s emissions. One carbon credit can offset the avoidance or removal of one tonne of carbon dioxide emissions, as per the diagram below by Shell.

Carbon Cycle

Carbon reporting

Earlier this year, the UK Government consulted on its proposals for mandatory disclosure of climate-related financial information by listed companies and large private companies and LLPs.

Draft regulations are likely to be published later this year, introducing reporting obligations in stages from April 2022 to 2025. These regulations will expand upon the Financial Conduct Authority’s new Listing Rule introduced earlier in 2021 that requires companies with a premium listing to state whether their disclosures are consistent with the recommendations of the Treasury-led Task Force on Climate-related Financial Disclosures (TCFD), or to explain why they have not provided such a statement. The new Listing Rule applied for accounting periods beginning on or after 1 January 2021.

Accountants will lead on ensuring that climate-related disclosures are in line with the TCFD’s recommendations and the four pillars. Although not mandatory for small and medium-sized entities (SMEs), nevertheless some SMEs may wish to make voluntary disclosure of climate-related financial information.

TCFD’s four pillars


  • A description of the organisation’s governance arrangements in place to identify and manage risks and opportunities arising from climate change.


  • To the extent the organisation is not required to report on its business model and strategy, a brief description of this information.
  • A description of how strategy may change in response to climate change, and the trends and factors that affect such change.

Risk Management:

  • A description of the principal risks and opportunities arising from climate change and how the organisation manages those areas.
  • A summary of the risk management policies adopted by the organisation, including the outcomes of those policies and any due diligence implemented in pursuance of those policies.

Metrics and Targets:

  • The KPIs and related targets relevant to the organisation’s exposure to climate change risk and opportunity.

TCFD disclosures: 4 pillars

TCFD disclosures: 4 pillars

Environmental reporting

Entities should consider and report on environmental factors that may impact an entity´s ability to execute its business strategy and create value over the long-term. Some factors are non-financial, but how an entity manages them could have measurably financial consequences. Accountants can assist with this risk analysis, and provide data to create new strategies and make decisions.

The metrics to consider for environmental impacts includes the following:

  • Energy usage
  • Energy mix
  • Water usage
  • Environmental operations
  • Climate oversight
  • Climate Risk Mitigation


Accountants have the skills to make a significant contribution to organisations understanding their climate change impacts, reducing their carbon emissions, carbon reporting, managing climate risk, and achieving a more environmentally sustainable business model.

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